The process of bitcoin mining is in its core a transaction verification process. When miners run their mining tools, specialized mining software, they are solving complex mathematical formulas that verify transactions inside the blockchain. Each time a bitcoin is mined, a new hash is added onto a block in the chain. As you can already assume, bitcoin miners are extremely important for this technology because they “check” the transactions, accuracy, and authenticity of the blocks.
Bitcoin mining comes down to the principle of hash technology, more precisely, hash solving technology. Hashes are extremely complex mathematical functions that can be solved only by a machine. They translate any given input into a fixed output. The hashes are a crucial part of blockchain technology. So bitcoin mining, in its essence, is an action of solving hashes.
Even though solving hashes is an advanced mathematical process, at the same time, it’s a breeze from a miner’s point of view – all of the work of bitcoin mining is done for you by a machine. Basically, anyone can do this, regardless of their level of IT knowledge and education. However, there are some important things that you need to learn before you start mining. The first of those important things that you need to understand is that there are various forms of the activity in question. Let’s explain!
Cloud Mining — Mining as an Investment
You can pay for your share to a mining company and thus gain value for your investment, but without participating in the process of mining per se. Joining a mining cloud is one of the very popular mining methods — a company uses its own hardware, software, and resources for it, while you only participate as an investor.
This option gained popularity for two main reasons. The first reason is quite obvious; because it’s a lot easier. It requires little to no involvement from your part. You don’t need knowledge about different graphics cards, mining tools, or anything of the sort to take part in cloud mining. Besides this, many people believe that cloud mining is a less expensive method — you contribute with your investment, but don’t have to worry about the electricity bill, or to upgrade your PC.
However, if you decide to go with this option, you will need to do your research on various packages and choose the best one. This part with choosing the right package is more about the economy, so if you have any experience in investment banking, you should go with a cloud mining option. Different companies offer various packages, and you should pick the one that is best suited to your ambitions. Ask yourself how much you wish to earn from bitcoin, and how much you are ready to spend on it before you choose your package. Now, let’s go to the next mining method — joining the pool.
Research the Pool
This method of bitcoin mining is also quite popular. To mine bitcoins as a part of a pool, you will need your equipment and mining software, but you will achieve this faster than if you were to do it alone. Bitcoin mining pools are basically groups of miners that solve hashes together. After you install your software, you can join the pool, and work with other peers on the blockchain. Even though this method is a lot faster than mining on your own, be sure to do thorough research of various mining pools before you join them. The trick with this method is to join a reliable pool — this is the single most important part. So if you decide to go with this option, take your time, and find as much information as you can on pools before you join them. Now, let’s move on to the third choice — setting your own mining operation.
Personal Mining — Mining With Your Own Hardware
Before we explain how you can mine bitcoins on your own, you need to understand the costs of this method. First of all, there is an electricity bill! This part shouldn’t be taken lightly — you need to set your goals before you start mining and see whether this method is right for you. You need to understand that the entire 90% of bitcoin mining expenses go solely on the electricity bill. So before you decide to choose this option, use some of the online calculators that will help you predict your electricity expenses. However, this whole story about great electricity usage of mining machines can be looked at from the brighter side — power will remain your biggest expense throughout the whole process.
Now, since we warned you about your possible big bill, let’s get to the interesting stuff. How does bitcoin mining work? Well, before people thought that the best way to solve hashes is with CPU. However, as the bitcoin technology advanced, it became almost impossible to do it this way. Today, graphics cards keep proving themselves as the best for digital currency mining. So now you can turn your own gaming PC into a bitcoin mining machine! Also, don’t forget that you may need to improve your GPU to bitcoin mine — not all PCs have required GPU quality for such an undertaking.
Since bitcoin mining became such a competitive field, we recommend you to purchase your own Application Specific Integrated Circuit — investing in your hardware will pay off! The price of Specific Integrated Circuit (ASIC) can range from $1,000 to $3,000 — but asic miner can develop impressive hash power of 14.0 TH/s. Let’s see the comparison of the most popular miners!
|Name||Core Clock||Memory||Memory Clock||Power Connectors||Power draw||Hash Rate||Outputs|
|Nvidia GeForce GTX 2080 Ti||1,350MHz||11GB GDDR6||14Gbps||2 x 8-pin||155w||56.5 Mh/s||3 x DisplayPort 1.4|
|AMD Radeon RX580||1257 MHz||8 GB GDDR5||2000 MHz||1x 8-pin||85 W||27.5 MHash/s||1x HDMI DisplayPort 3x|
|AMD Radeon RX570||1,168MHz||8GB GDDR5||7Gbps||1 x 8 pins, 1 x 6 pins||120W||1 DisplayPort 1.4, 1 x HDMI 2.0||29 MH / s|
|AMD Radeon RX Vega 56||1,156MHz||8GB HBM2||800MHz||2 x 8 pins||210W||3 x DisplayPort 1.4, 1 x HDMI 2.0||37 MH / s|
|Nvidia GTX 1080 Ti||1,480MHz||11GB GDDR5X||11GHz||1 x 6 pins; 1 x 8 pins||250W||3 x DisplayPort 1.4, 1 x HDMI 2.0||32 – 50 MH / s|
Now that we know all crucial things about the hardware in the Bitcoin mining business, let’s learn about software technology.
So we have covered the warning about electricity, and the difference between CPUs and GPUs computing power — meaning that we covered the hardware part of the story. Now, let’s talk about the software part!
Since you have the appropriate GPU, and you are comfortable with high electrical power consumption, let’s download the software! To mine bitcoins, you will need a mining tool, a software that will solve hashes for you, and show you all the necessary statistics. Since this activity became so popular over the years, now you can easily find software for all popular operating systems, such as MAC, Windows, and Linux.
Once you install your mining software, you connect to a bitcoin network, and you can start filing your bitcoin wallet. Some software will ask you to choose between CPU and GPU right at the start. We advise you to go with the latter one, due to its larger hashing power. The software will offer you to fill the username field and will display you a field that needs to contain your bitcoin wallet information. Setting up a mining software is easy, and all it takes are a few simple steps. These applications are designed to be used by people who don’t have knowledge about hash technology, or any advanced IT stuff — so don’t be nervous about this part. Plus, a mining software will at all times display important statistics such as temperature, and your profits. Let’s meet the most popular mining softwares!
- CGMiner — Easy to use software; supports Windows, Mac OS X, and Linux
- MultiMiner — Advanced features; open-source; supports Windows, Mac OS X, and Linux
- BitMinter — Very easy to use; Java Network Launch Protocol based
- BFGMIner — Provides pretty detailed statistics
- MinerServer — Great for pool mining
Since we have learned about the software, let’s move on to another highly important part — your bitcoin wallet!
Types of Wallets
As you probably already know, just as you keep your regular money in your bank account, you keep your bitcoins in your bitcoin wallet. There are wallets that are based on the online storage principle, and those that are based on an offline one. So what’s the key difference between those two?
Online wallets have their public and private keys, and they are basically pretty secure methods of storing bitcoins. However, it can happen that an online wallet gets hacked — it’s quite rare, but possible. Basically “everything” that is connected to the web can get hacked, including the bitcoin wallets. So a lot safer method of keeping your cryptocurrency secure is to store it offline. One of the popular and safe bitcoin storing methods in on the hardware wallet called TREZOR. However, today, there are many safety features that you can activate on your online wallets, such as complex encryptions and regular backups.
As we have seen, bitcoin mining is not a difficult process, as long as you inform yourself about all the necessary aspects such as various methods, costs, and investment. So let’s sum things up before we say goodbye!
Cloud mining is more an investment method than actual mining. Pool mining is a great way to speed things up, but you need to do your research and find a reputable pool. Mining by yourself is not so difficult, but you need to invest in quality hardware, install proper software, and be aware that your electricity bill is going to be higher than usual. These are all basic things that you need to know about bitcoin mining! Remember, always do your research, plan everything ahead, and don’t be afraid to invest! We wish you happy mining!